scarred to be suitable as a pricey gift, but
the relatively small amount of leftover fruit
that they grew made it difficult to think of
a product that could achieve a national
scale. After many meetings between the
local farmers, Aeon’s Niigata office, the
regional headquarters, and top managers
from national headquarters, they came up
with the idea of a light alcohol drink flavored
with 3% Niigata Le Lectier juice, which they
branded “Niigata Le Lectier cocktail.” This
solution satisfied Aeon’s historic commitment to “locally rooted retailing” and yielded
a popular new product that met the company’s scale requirement.

As these examples suggest, Aeon doesn’t
always resolve these challenges in the same
way. Some innovative solutions aim for
more localization (as in the ski town’s fashion boutique), others for chain-wide
products that use a local ingredient (as in the
development of the Niigata Le Lectier cocktail). Some are led by one particular layer of
management, while others develop through
collaboration among the headquarters, regional headquarters, and local stores (as in
the Le Lectier drinks). But in each case,
managers solve the problem not by trying to
ignore tensions but by acknowledging the
needs of each side. They see the conflict not
as an impasse but as an opportunity — a set
of constraints that spurs creativity.

Aeon does this by nurturing a culturethat emphasizes the importance of eachstrategic mandate. At the national head-quarters, managers are taught to focuslargely on strategies that can help the entirenetwork. Local managers, meanwhile, aretrained to look for ways to meet the needs ofthe community and customers they serve, inaddition to implementing the instructionsof the regional managers. Finally, the re-gional managers’ responsibility includeslistening to both the national and localmanagers’ proposals, trying to understandwhere those demands conflict, and workingthrough new approaches to overcome thoseconflicts. In addition, the people in thesedifferent layers spend time getting to knoweach other. Executives say this creates asocial glue that helps keep the differentmanagerial layers working together as ateam despite the inevitable disputes.

The strategy of trying to reconcile opposing views isn’t a new one for the retailer.

Aeon began as a family business in 1758.
Founder Sozaemon Okada traded kimono
fabrics and accessories in accordance with
the beliefs of a group of fellow merchants
(known as the Ohmi merchants) who had
developed a philosophical idea of how a
merchant should behave. Their theory
consisted of three precepts, which don’t
sound very different from contemporary
ideas about sustainable business: A merchant should be good to his customers, good
to his community, and good to his own
company. The concept remains an important enough part of Aeon’s cultural DNA
that even today, new employees are given a
manga comic book that talks about the importance of being fair to every stakeholder.

Creating solutions that meet conflictingneeds can do more than resolve a politicaldilemma. Because they are built with Aeon’sunique blend of local and national capabili-ties in mind, the complexity of the solutionsoften deters imitation. The consensus solu-tion, whether it involves designing stylishclothes for women living in a Japanese skivillage or finding a way to turn a tiny avail-able quantity of pears into a nationalproduct, tends to be one that can be exe-cuted well by Aeon but not easily copied byanyone else.

Of course, resolving these conflicts
requires ongoing work. Managing this
built-in strategic paradox of pursuing
both localization and nationwide standardization demands the continual
attention of management. To keep the
atmosphere positive, Aeon’s top management, including the CEO, frequently
communicate their commitment to their
dual strategy to managers at each level of
the organization. Each side is encouraged
to feel free to make a proposal and equally
free to counter an idea with a different
concept. Even when a temptingly simple
one-sided solution seems plausible, Aeon’s
managers find that wrestling with the
problem until a solution emerges that sat-isfies everyone results in a better outcome.
As one executive told us, “The greater the
tension, the better the action.”

Toshiro Wakayama is a professor of
innovation and strategy at the Graduate
School of International Management of
the International University of Japan in
Minami-Uonuma, in the Niigata prefecture
of Japan. Karen LaPierre is an associate
leadership coach and research fellow
at Leading Coach, a Tokyo coaching
firm. Comment on this article at
http://sloanreview.mit.edu/x/58302, or contact the authors at smrfeedback@mit.edu.

ACKNOWLEDGMENTS

The underlying research for this article benefited
from discussions with Hisashi Kurata, Ayako
Ogawara, and Steven White in its early stages.

Managers solve the problem not by trying to
ignore tensions but by acknowledging the
needs of each side. They see the conflict not
as an impasse but as an opportunity — a set
of constraints that spurs creativity.